Big Tech needs to generate $600 billion in annual revenue to justify AI hardware expenditure

AI hardware investments by Big Tech companies must generate $600 billion in annual revenue to justify the massive spending. Sequoia Capital analyst David Cahn highlighted a significant gap between the expected revenue from AI infrastructure and the actual revenue growth, noting that the annual revenue requirement has tripled from $200 billion to $600 billion in a year.

Cahn's analysis involved Nvidia's data center run-rate revenue forecast and the implied total costs, predicting further increases with Nvidia's B100 chip release. He pointed out that the AI revenue needed for payback could rise to $100 billion, emphasizing the necessity of matching the capital expenditure with real end-customer demand.

Despite the optimism from major tech executives and positive revenue growth reports, such as Microsoft's Azure, Cahn stressed the potential risks investors face. He argued that while infrastructure build-outs might eventually pay off, they require careful consideration of who benefits and who bears the losses during this period of experimentation.